As the Zimbabwe Stock Exchange (ZSE) embarks on a new chapter after listing its holding company on its own bourse, all eyes are on what this bold move means, coming after 130 years since establishment. In this exclusive interview with the Zimbabwe Independent’s Ruth Maseko (RM), chief executive officer Justin Bgoni (JB, pictured) explains the strategic thinking behind self-listing, outlines investor expectations, and unpacks plans to strengthen both the local currency-denominated exchange and the hard currency-indexed Victoria Falls Stock Exchange (VFEX). With dividends in sight and acquisitions on the radar, Bgoni paints a picture of an exchange aiming to lead from the front:
RM: You recently listed on the ZSE. Please explain what this means.
JB: It has been part of our strategy for five years. We wanted to list on our own exchange for several reasons. The first was to drive shareholder value. Our shareholders want their shares to be freely tradable on the exchange. That was important.
The second is we ask others to list, and they always ask why we are not listed. It made sense for us to be listed. The third reason was in terms of corporate governance. When you are listed, you have strong corporate governance. This is important. The other reason is if you are an exchange, people have to trust you with their money. So, they want to see that you are strong, and you are able. Those are the reasons why we listed.
RM: Now that you are listed, what is the sentiment?
JB: It is early days. We are not looking very much at what is happening. Our half-year financial statements are coming out, and I think after that, people will realise exactly how we operate. We intend to do an analyst briefing and explain how we make money, our plans, and everything. We think after that you can start seeing exactly how our trade is going. Because we did not do an IPO (initial public offering), we did it by introduction. Therefore, it is people that are already shareholders. We want to attract a new type of shareholder, and we will put effort into that after the half-year publication.
RM: What kind of investors are you looking at now?
JB: We need institutional and retail investors to be part of our shareholders. Normally, the exchange is very good in terms of dividends. We expect, all things being equal, to pay a dividend every year. If you are looking for a company that pays dividends, it will be one of those companies that you buy.
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RM: And naturally, you earn through fees and commissions.
JB: All listed companies were paying master fees anyway. We are running a proper business. We have been saying we are an attractive business because, unlike others, 70% to 80% of our money is guaranteed. As long as someone is listed, they pay the fees. They pay every quarter, hence we are a stronger business in that regard. We are less susceptible to market dynamics.
Then, about 20% is what goes on trading on a monthly basis. In terms of the advantage of getting listed, it allows us to grow better. We should be able to raise money when we want to. Also, it will help us buy other businesses and expand our portfolio.
RM: Are you planning to buy anytime soon?
JB: It is something that we are looking into because we are listed now. We have to be cautious. But we are always scanning the environment to see what business we can add that enhances shareholder value. So definitely, we are on the lookout.
RM: Is there a specific reason why you chose to list on ZSE, not on VFEX?
JB: There are several reasons. Of the two exchanges, ZSE is the biggest and oldest. It made sense to list on that brand where we get most of our money. It is a vote of confidence in ZSE. VFEX has been more fortunate. There have been more listings of late. It was also important to show confidence in ZSE.
RM: There has been talk that ZSE has failed to attract capital for investors.
JB: I don’t think it is true. I think you saw what happened with OK Zimbabwe. OK came to the market to raise US$20 million to save the business. If it was not listed, I think they would have struggled to raise that money. If you have an attractive offering, and shareholders believe it, you can raise money on the ZSE.
RM: Take us through some of the challenges you have been facing.
JB: The first one has been the currency. The currency has been a problem for a long time, but we are happy that there is more stability now, although there is a problem with liquidity. When there is hyperinflation, it limits the products that you can bring on the market. So, for example, you expect debt to be a big part of your market, but when inflation is high, people will not invest in debt products. In terms of taxes and everything, the government has been good for us. They have reduced taxes. It was 4%, now it is 1%. One percent is a fair tax. But when your currency is not stable, you have a problem. When inflation is high, you have a problem.
RM: You intended to revive the government bond. Where are we now?
JB: Yes, because if you look at all the exchanges in Africa, the biggest portion of their listings is government debt.
RM: But given recent fluctuations in trading volumes on ZSE, what can you say are the key factors driving liquidity levels?
JB: If you look at the first six months of this year and compare to the first six months last year, trading volumes are up by more than 100%. It is more than double.
The ZSE is about 108% up, and VFEX is about 231% up. Therefore, we have seen an increase in trading. There has been a shift from institutional investors, such as pension funds, to a more diverse shareholder base, which, unlike other people, we are quite happy about.
I know some people are worried because pension funds are holding fewer equities, but we are happy that it has introduced a new type of investor — more companies and richer individuals. They have got more shares now. And we are happy about that diversity. I think most people do not know that the trading has gone up. What has not worked is that share prices are coming down a bit on the ZSE side, but they have remained stable on the VFEX side.
Some people have used the ZSE to pay statutory obligations, hence there has been some pressure. For us, the currency, liquidity, and interest rate tend to be the things that drive so much on the ZSE side. And the other thing, especially for foreign investors, is the ability to take money out. We think it is better now, but I think it is the stability that foreign investors are looking at to see whether it is the right time or not to come. But I always tell people that foreign investors are out of not just Zimbabwe, but across Africa — so it is not just us.
If you look at Kenya and Nigeria, there has been a loss of foreign investors. Most of them have gone to South-east Asia.
